Query on Treatment of VHI as a BIK for a PAYE Worker

I

InfoSeeker

Registered User
Messages
460
I have started a new job this week and the company I am working for pays VHI for their employees (Plan B & Company Plan Plus), employees are charged Benefit in Kind on VHI.

They stated the following on one of their intranet pages though their is no contact details so this is why I am posting this thread.

To Claim Tax Credit on VHI BIK:
Employees can phone Revenue on 1890 222 425, giving their PPS number and informing Revenue of the above.
Give Gross amount of VHI for the current year, 20% tax credit on Gross amount will be added to Tax Credits.

Does this mean that if VHI costs were 1,000 per year then one would be entitled to 200 euro in additional tax credits per year?

Also in my previous company my employer paid VHI but I was not aware of this credit and never claimed it.

I did not know how this worked but I assumed that the BIK on my payslip was the monthly payment for VHI having taken account of this tax credit.

Perhaps it is possible to do it both ways and it is up to the employer, I just do not know so would be grateful if someone could explain this as I might be entitled for a refund for previous years though I doubt it as no one else in my previous company did anything about this afaik.
 
You are probably due a refund for your prior years.

The way it works is, if your premium is €1,000 p.a., your employer pays over €800 to VHI (or whoever) as they get the benefit of the tax relief at source. The employer then pays the extra €200 to the Revenue.

You are taxed on this BIK of €1,000 and so pay additional income tax of €410 during the year (ignoring PRSI). However, you haven't received the benefit of the 20% tax relief on health insurance premiums - so you need to contact the Revenue and advise them that you are getting a premium worth €1,000 paid by your employer. Your tax credits then reduce your tax for the year by €200, so the net cost to you of your health insurance for the year is only €210 (the 410 tax on the bik less the tax credit).
 
You are subject to BIK tax and PRSI/health at source (payroll) in employer paid private health insurance premiums but you can also apply for a standard rated tax credit on the same gross premiums. The link to the FAQ on this used to be readily available on Revenue's website but I can't find it now!

Post crossed with Nige's.

Update: here is the link that I was looking for:

[broken link removed]
 
Thanks Nige, that makes perfect sense.

I have been doing this for the last 6 years so I will contact them today, I think I can only go back 5 years but I am sure they will inform me.
 
You can only go back 4 years - i.e. as far back as 2004 right now.

Our VHI rep told us about the employee credit in this situation but none of my colleagues seem to have bothered claiming it. Naturally I did.
 
I stand corrected, thank you.

It is nice to know, most employees in the previous place of employment would have no clue re this, if it works out that I am entitled to a refund then there I will make a lot of people happy:)
 
Thanks Clubman for the link you posted above.

It is clear from that that in my new job where my employer pays the full premium that I will be granted a tax credit (at the standard rate) for the gross premium in my certificate of tax credits. I am assuming I have to contact Revenue to get this credit.

I contacted my previous employer & he stated in my previous job that tax relief is granted at source. The BIK that employees pay is on the net amount of the VHI premium, which is after the tax relief has been granted.

Using my initial example, if the VHI premium was €1000, only €800 of that would be put through as BIK for the year, meaning that the tax relief is received at source. He stated that nothing would be due to me.

My understanding and I am sure it is incorrect is the following....this is why I am still confused:(

In my new job as Nige previously stated I am taxed on this BIK of €1,000 and so pay additional income tax of €410 during the year (ignoring PRSI). However, I did not get 20% tax relief on health insurance premiums - so I contact Revenue and advise them that I am getting a premium worth €1,000 paid by my employer. My tax credits then reduce my tax for the year by €200, so the net cost to me of health insurance for the year is only €210 (the 410 tax on the bik less the tax credit).

So far all is ok, the confusion lies with my previous job.

In that job 800 is put through as BIK so I would pay tax on 800@41% = 324 which is greater than the 210 above.

Can someone point out what I am doing wrong please?
 
InfoSeeker said:
I am assuming I have to contact Revenue to get this credit.
Click to expand...
Yes - you can do it on the PAYE Self Service online system or just write to them with details of your premium.
I contacted my previous employer & he stated in my previous job that tax relief is granted at source. The BIK that employees pay is on the net amount of the VHI premium, which is after the tax relief has been granted.
Click to expand...
Tax relief is granted at source to the payer of the premiums (the employer) but the beneficiary (employee) should still be able to claim the credit.
 
You're not doing anything wrong, but your previous employer is.

Your BIK should have been based on the gross health insurance premium. If your employer didn't do this correctly you were undertaxed (and the employer will have underpaid PRSI and may not have paid over the trs to the Revenue).

However, as you didn't get a standard rate credit for the health insurance, overall you were overtaxed for the year. If you have your policy details, just ring VHI and as for details of the gross premium paid on your behalf for the last four years, then submit your P60s (or copies of them) for these years to the Revenue with details of the VHI premiums and ask for the tax refund you are due.
 
I contacted the VHI and gave them my policy number but they were unable to give me the gross premium paid on my behalf for the last four years. They replied saying that:

"I would like to advise that as your VHI policy operated through Company X at this period in time, and also, VHi premiums are tax deducted at source since 2001, you will need to contact the payroll department there to obtain these figures"

So I had a think and believe that all I need is my final payslip for each of the last 4 years as this will tell me 80% of my VHI premium due to the way my employer handled this BIK. Then I simply need to gross it up to 100%.

I contacted payroll in my old company and then said everything is in storage and it would be expensive to access it.

I moved house in May and stupidly I seem to have lost my P60 for 2004, 2005 & 2006.

Will Revenue issue another copy?

I have signed up to reachservices on their website and am awaiting clearance from them as perhaps as I can access this info via them.

If anyone can assist then I would appreciate it and yes I realise it was my own fault for misplacing the above documents:(
 
InfoSeeker said:
...........

"I would like to advise that as your VHI policy operated through Company X at this period in time, and also, VHi premiums are tax deducted at source since 2001, you will need to contact the payroll department there to obtain these figures"

.....................
Click to expand...

I have done exactly what you did, i.e rang VHI, and they were able to tell me what was paid.
 
InfoSeeker said:
So I had a think and believe that all I need is my final payslip for each of the last 4 years as this will tell me 80% of my VHI premium due to the way my employer handled this BIK. Then I simply need to gross it up to 100%.
Click to expand...

That's correct.

I moved house in May and stupidly I seem to have lost my P60 for 2004, 2005 & 2006.

Will Revenue issue another copy?

I have signed up to reachservices on their website and am awaiting clearance from them as perhaps as I can access this info via them.

If anyone can assist then I would appreciate it and yes I realise it was my own fault for misplacing the above documents:(
Click to expand...

The Revenue should have your tax details on file from your employer's P35 returns, so they should be in a position to refund you the tax overpaid without you providing your P60s if you confirm to them that you had no non-PAYE income.
 
Nige, thanks again for the informative & quick response.

So if I call them and explain that my previous employer did not handle the BIK on VHI correctly in my opinion, also tell them that my only source of income in this period was from this employer (which is true) then possibly that is all I need to do?
 
InfoSeeker said:
So if I call them and explain that my previous employer did not handle the BIK on VHI correctly in my opinion,
Click to expand...


It's not that they didn't handle the BIK, it's just that, as far as you are aware, they only charged you on 80% of the premium and that, as you didn't claim the tax credit, you are now due a refund.
 
My job has been paying my VHI, im now married , the job pays
for the wifes VHI ( i pay the tax on it), am i entitled to extra tax relief,
would this be automatic ?
 
Yes, you are entitled to additional tax relief but it's not automatic so contact your Revenue office to ensure you are getting the full tax credit.
 
InfoSeeker said:
So I had a think and believe that all I need is my final payslip for each of the last 4 years as this will tell me 80% of my VHI premium due to the way my employer handled this BIK. Then I simply need to gross it up to 100%.
Click to expand...
Obviously this means dividing the net figure by 8 and multiplying by 10. Some people mistakenly assume it means multiplying the net figure by 1.2!
 
You must log in or register to reply here.
Back
Top